Feb 5, 2013

Tax Implications with Binary Options

Here is a quick update. First, this is not to be used as legal advice. As of July 1, 2014 the IRS now has access to the offshore broker bank accounts. This simply means it's fully taxable if you make profits and you treat it the same as interest income if you live in the United States. This is a good thing and means no legal issues or bank accounts frozen as long as you stick the profits on your tax return that you make. For U.S. or international traders, you can pick a broker here.

For those residing in Europe or other countries, it depends on that individual tax laws of the countries. Some places in Europe for example may treat it as a normal capital gain while others may classify it as gambling, which means no taxes. Check with the authorities.

You have to report 1 or both forms if you meet the threshold asset value... If you are confused, just look up "FATCA". Here is the Form 8938...http://www.irs.gov/pub/irs-pdf/f8938.pdf.......................................... and here is the form most will need if they have over $10,000 account...http://www.fincen.gov/forms/files/FBAR%20Line%20Item%20Filing%20Instructions.pdf

Reporting Threshold (Total Value of Assets)
Form 8938, Statement of Specified Foreign Financial Assets

$50,000 on the last day of the tax year or $75,000 at any time during the tax year (higher threshold amounts apply to married individuals filing jointly and individuals living abroad)
FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)

$10,000 at any time during the calend

If it's under $1,500, it will just be taxed at your marginal tax rate. However, if it's over $1,500 than you put it on schedule B and it ends up with a maximum tax rate of 20% no matter how much you make. In my readings on these forms, it showed all kinds of possible income types including interest, which is what most traders would be worried about reporting on.

Have fun and get trading.


  1. can you please specifically explain tax implications in india??

  2. Well it appears to me that it is not a capital gains and rather reported as regular earned income and taxed at whatever your tiered tax rate is. I would check with an accountant in the area you life though.